The Number of Businesses in Significant Financial Distress is Now 581,596

The most recent research from Red Flag Alert, who specialise in examining the financial health of British companies, shows the huge impact two years of financial pressure has had on thousands of companies in the UK.

The report reveals that there has been a 19% jump in the number of companies in critical financial distress since the support which was offered by the state during the pandemic has been cut off, this has been further compounded by the extraordinary rise in the costs of running a business.

The number of businesses in significant financial distress is now 581,596.

These findings are borne out by the Insolvency Service statistics which show there has been a significant rise in corporate insolvencies.

After seasonal adjustment (where applicable), there were 4,896 company insolvencies registered in Q1 2022, 6% higher than the number of company insolvencies registered in the previous quarter and more than double the number (112% higher) during the same quarter in the previous year. The total number of registered company insolvencies in Q1 2022 was the highest since Q2 2012.

Creditors’ voluntary liquidations (CVLs) were the most common company insolvency procedure (87% of cases), followed by compulsory liquidations (7% of cases), administrations (5% of cases) and company voluntary arrangements (CVAs; 1% of cases).

The three industries (in accordance with SIC 2007) that experienced the highest number of insolvencies in the 12 months ending Q1 2022 were:

• Construction (3,213 insolvencies, 19% of cases with industry captured);
• Wholesale and retail trade and repair of vehicles (2,100 insolvencies, 13% of cases with industry captured);
• Accommodation and food services activities (1,977 insolvencies, 12% of cases with industry captured); and

These were also the three sectors with the most insolvencies in the 12 months ending Q1 2021. The construction industry usually has the highest quarterly number of insolvencies of any industrial grouping.

All industries saw increased insolvency numbers in the 12 months ending Q1 2022 compared to the period ending Q1 2021. For the larger sectors (those accounting for at least 5% of insolvencies), increases ranged from 28% in Manufacturing to 85% in Construction.

Further reading can be found on the Insolvency Service website.

Contains public sector information licensed under the Open Government Licence v3.0.